Efecto del tipo de cambio sobre el déficit fiscal: un modelo estocástico de reversión a la media con saltos para el caso colombiano

Clark Granger-Castano (), Jhon Fredy Moreno-Trujillo () and Francisco Venegas-Martínez

Revista de Economía del Rosario, 2018, vol. 21, issue 2, No 17975, 193-218

Abstract: The most used methods to assess the impact of the exchange rate on the fiscal deficit are deterministic and are based on the elasticities of each of the variables affecting the deficit. This provides a very limited idea of the magnitude and direction of future shocks. This research develops a stochastic model useful to evaluate the impact of the exchange rate on the fiscal deficit in an environment of uncertainty. To do this, the dynamics of the exchange rate depreciation is driven by a mean-reverting jump-diffusion process. By using the theoretical proposed model, Monte Carlo simulations of the projections of the deficit of the Central National Government of Colombia (cngc) are carried out. The simulation provides estimates of fiscal targets considering the random effects of the exchange rate. Finally, from the obtained projections, a path of government debt is estimated based on the depreciation of the exchange rate, which is useful for the planning of the cngc expenditure and for the statement of fiscal goals.

Keywords: Fiscal deficit; exchange rate; stochastic processes; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: C63 H62 O24 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:col:000151:017975

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